Central bankers are running down their arsenal. But other options exist to stimulate the economy.

WORLD stockmarkets are in bear territory. Gold, a haven in times of turmoil, has had its best start to a year in more than three decades. The cost of insurance against bank default has surged. Talk of recession in America is rising, as is the implied probability that the Federal Reserve, which raised rates only in December, will be forced to take them back below zero.One fear above all stalks the markets: that the rich world’s weapon against economic weakness no longer works. Ever since the crisis of 2007-08, the task of stimulating demand has fallen to central bankers. The apogee of their power came in 2012, when Mario Draghi, boss of the European Central Bank (ECB), said he would do “whatever it takes” to save the euro. Bond markets rallied and the sense of crisis receded.But only temporarily. Despite central banks’ efforts, recoveries are still weak and inflation is low. Faith in monetary policy is wavering. As often as they inspire confidence, central bankers sow fear.

Negative interest rates in Europe and Japan make investors worry about bank earnings, sending share prices lower. Quantitative easing (QE, the printing of money to buy bonds) has led to a build-up of emerging-market debt that is now threatening to unwind. For all the cheap money, the growth in bank credit has been dismal. Pay deals reflect expectations of endlessly low inflation, which favours that very outcome. Investors fret that the world economy is being drawn into another downturn, and that policymakers seeking to keep recession at bay have run out of ammunition.

Bazooka boo-boo

The good news is that more can be done to jolt economies from their low-growth, low-inflation torpor. Plenty of policies are left, and all can pack a punch. The bad news is that central banks will need help from governments. Until now, central bankers have had to do the heavy lifting because politicians have been shamefully reluctant to share the burden. At least some of them have failed to grasp the need to have fiscal and monetary policy operating in concert. Indeed, many governments actively worked against monetary stimulus by embracing austerity.The time has come for politicians to join the fight alongside central bankers. The most radical policy ideas fuse fiscal and monetary policy. One such option is to finance public spending (or tax cuts) directly by printing money—known as a “helicopter drop”. Unlike QE, a helicopter drop bypasses banks and financial markets, and puts freshly printed cash straight into people’s pockets. The sheer recklessness of this would, in theory, encourage people to spend the windfall, not save it. (A marked change in central banks’ inflation targets would also help.)Another set of ideas seek to influence wage- and price-setting by using a government-mandated incomes policy to pull economies from the quicksand. The idea here is to generate across-the-board wage increases, perhaps by using tax incentives, to induce a wage-price spiral of the sort that, in the 1970s, policymakers struggled to escape.All this involves risks. A world of helicopter drops is anathema to many: monetary financing is prohibited by the treaties underpinning the euro, for example. Incomes policies are even more problematic, as they reduce flexibility and are hard to reverse. But if the rich world ends up stuck in deflation, the time will come to contemplate extreme action, particularly in the most benighted economies, such as Japan’s.Elsewhere, governments can make use of a less risky tool: fiscal policy. Too many countries with room to borrow more, notably Germany, have held back. Such Swabian frugality is deeply harmful. Borrowing has never been cheaper. Yields on more than $7 trillion of government bonds worldwide are now negative. Bond markets and ratings agencies will look more kindly on the increase in public debt if there are fresh and productive assets on the other side of the balance-sheet. Above all, such assets should involve infrastructure. The case for locking in long-term funding to finance a multi-year programme to rebuild and improve tatty public roads and buildings has never been more powerful.A fiscal boost would pack more of a punch if it was coupled with structural reforms that work with the grain of the stimulus. European banks’ balance-sheets still need strengthening and, so long as questions swirl about their health, the banks will not lend freely. Write-downs of bad debts are one option, but it might be better to overhaul the rules so that governments can insist that banks either raise capital or have equity forced on them by regulators.Deregulation is another priority—and no less potent for being familiar. The Council of Economic Advisors says that the share of America’s workforce covered by state-licensing laws has risen to 25%, from 5% in the 1950s. Much of this red tape is unnecessary. Zoning laws are a barrier to new infrastructure. Tax codes remain Byzantine and stuffed with carve-outs that shelter the income of the better-off, who tend to save more.

It’s the politics, stupid

The problem, then, is not that the world has run out of policy options. Politicians have known all along that they can make a difference, but they are weak and too quarrelsome to act. America’s political establishment is riven; Japan’s politicians are too timid to confront lobbies; and the euro area seems institutionally incapable of uniting around new policies.If politicians fail to act now, while they still have time, a full-blown crisis in markets will force action upon them. Although that would be a poor outcome, it would nevertheless be better than the alternative. The greatest worry is that falling markets and stagnant economies hand political power to the populists who have grown strong on the back of the crisis of 2007-08. Populists have their own solutions to economic hardship, which include protectionist tariffs, windfall taxes, nationalisation and any number of ruinous schemes.Behind the worry that central banks can no longer exert control is an even deeper fear. It is that liberal, centrist politicians are not up to the job.

The siege of Aleppo is a humanitarian catastrophe on a dramatic scale -- and a victory for Russian President Vladimir Putin. He has seized on the Syrian civil war to expose an impotent West and show his own geopolitical muscle. By SPIEGEL Staff

Aleppo has been a horrific place for some time now and few thought that it could get much worse. But things can always get worse -- that's the lesson currently being learned by those who have stayed behind in an effort to outlast this brutal conflict. People who have become used to dead bodies in the streets, hunger and living a life that can end at any moment."For the last two weeks, we've been living a nightmare that is worse than everything that has come before," says Hamza, a young doctor in an Aleppo hospital. At the beginning, in 2011, he was treating light wounds, stemming from tear gas or beatings from police batons. When the regime began dropping barrel bombs in 2012, the injuries got worse. But now, with the beginning of the Russian airstrikes, the doctors are facing an emergency. Every two or three hours, warplanes attack the city, aiming at everything that hasn't yet been destroyed, including apartment buildings, schools and clinics. Often, they use cluster bombs, which have been banned internationally.They used to get around 10 serious injuries per day, but that number has now risen to 50, says Hamza, adding that most of their time is spent sorting body parts so they can turn them over to family members for burial. Russian missiles, he says, tear everyone apart who is within 35 meters of the impact."On one day, we had 22 dead civilians. The day before that, it was 20 injured children. A seven-year-old died and an eight-year-old lost his left leg." The Russians attacked in the morning, he says, as the children were on their way to school. "We are going to need years of therapy in order to be able to cope with all this."There are seven doctors still working in the hospital. "Since the Russians began bombing the city, even more doctors have fled," Hamza says. There are only about 30 medical professionals left in all of Aleppo, he adds. His hospital too is under fire and Hamza's voice can be heard trembling over the phone. The regime, he says, has targeted the hospital five times in the past several years, but always missed. "The Russian bombardment, though, is very accurate." One recent bomb, he says, just barely missed them.

A Nightmare Worse than Sarajevo

"But here in the center of Aleppo," the doctor says, "there aren't any Free Syrian Army positions. Only civilians. They are bombing us to soften us up for the regime." Assad's troops, he explains, have already taken many surrounding towns and villages and he is afraid that Aleppo will soon be completely surrounded. One thing he is no longer hoping for is external assistance, saying the international community abandoned Syria long ago. "After all, the US supports the attacks," he says.Hamza is unsure how he will survive. He does not know. But leaving the city would mean one fewer doctor, which in turn would translate into more deaths. He says that more and more people are leaving Aleppo and that entire city quarters are emptying out. Those who are able are fleeing while they still can.Once upon a time Aleppo was the largest city in Syria, an economic powerhouse with a city center listed as a UNESCO World Heritage site. But over the last three years, it has been divided between the regime and the rebels -- the same rebels who joined together to drive Islamic State (IS) out of the city two years ago. Aleppo is the most important symbol of the resistance in the country, but now it is all but surrounded and cut off from the most important supply routes. There is no more diesel, hardly anything to eat and there are severe shortages of electricity and water. According to the United Nations, there are still some 300,000 people living in Aleppo -- a population that may now have been abandoned to a rapid death from the sky or the slow death of starvation. It is a nightmare that could ultimately become worse even than Sarajevo was.Back then, during the siege of Sarajevo in the 1990s, NATO intervened, the Dayton Accords soon followed and the peace has held until today. In Aleppo, there are no signs of peace coming any time soon. The Syrian civil war has been raging for five years now and 250,000 people, or even a half million, have died -- the UN has stopped counting. It is a war in which more than 10 percent of the Syrian population has been killed or injured and 11 million have been displaced, either inside Syria or as refugees abroad. Yet there is still no Dayton in sight.In Aleppo, the West is faced with the ruins of its policy of inaction, which it has sold as diplomacy. Western politicians, including the German foreign minister, have continually insisted that only a diplomatic solution can stop the violence in Syria. Even at the Munich Security Conference last week, US Secretary of State John Kerry was seeking to continue the Geneva talks, which had been suspended until Feb. 25 largely because Russia refused to reduce the number of airstrikes it is carrying out. Ultimately, a "cessation of hostilities" was agreed to in Munich, but it seems unlikely it will be worth much, particularly after the bombings of two hospitals on Monday, allegedly by the Russians, though Moscow has rejected the accusations.

Ground Zero of Global Geopolitics

Moscow's approach to diplomatic efforts has clearly shown just how cynical this game has become. Russia has said that a real cease-fire can't be reached before the end of February, making it clear that Russian President Vladimir Putin only intends to negotiate once he has reached his military goals. And German diplomats have said that Russia has refused to offer any guarantees that the Assad regime would adhere to a cease-fire.Aleppo has made it clear that there could very well be a military solution for Syria: the victory of Assad achieved with the help of Russian bombs and Syrian and Iranian ground troops. It would be the victory of a regime that tortures and murders, a regime that drops barrel bombs on its own people and kills them with chemical weapons. It is a regime which stands accused by the UN of the "extermination" of its own population. It would likely, though, be a victory without peace. Syrian President Bashar Assad's calculation seems to be that once the rebels are destroyed, only the regime and Islamic State would be left -- and no other alternatives. But the Sunnis, which have long been in the majority in Syria, aren't likely to throw their support behind an Alawite-Shiite Assad regime. Syria would face years of Somalia-like failed state status.The war has long since ceased being solely about Syria. The country has become Ground Zero of global geopolitics, an unholy mixture of Russia's desired return to superpower status, an increasingly authoritarian Turkey, tentative US foreign policy, the Kurdish conflict, the arch-rivalry between Iran and Saudi Arabia, Islamist terror and the inability of a divided, crisis-ridden EU to do much of anything.The war in Syria has transformed from a civil war into a world war.It has long since reached Europe in the form of millions of refugees, terror attacks in Paris and attacks on tourists in Tunisia and Istanbul. And America, which has long been the leader of the West and guarantor of security in Europe, has refused to get involved. Aleppo is therefore a test of Russia's relationship with the West, a measuring stick for the value of democracy and a litmus test of the effectiveness of a morals-based foreign policy.

Vladimir Putin: 1; World: 0

Already, Vladimir Putin looks to be one of the conflict's winners. When it comes to the war in Syria, he is now in control. Without his bombers, military advisors and special forces, the weakened Syrian army wouldn't be able to make any advances at all. Indeed, it was the looming defeat of Assad that pushed Putin to intervene at the end of September in the first place. At the time, Putin was still claiming that his goal was that of defeating IS -- and many Western governments hoped naively that perhaps Russia could finally impose order in Syria.Since then, though, it has become clear that the opposite is true: In four-and-a-half months, Putin has reversed the momentum in the Syrian civil war in favor of dictator Assad and has increased the chaos -- all while largely ignoring Islamic State. What's more, Moscow has targeted exactly those rebels that the West had hoped would fight IS. Putin has embarrassed the US superpower, discredited the UN and transformed Russia into an influential power in the Middle East.In addition, his brutal operation has driven tens of thousands of people to take flight, thus intensifying the conflict between the EU and Turkey, dividing Europe even further and propelling the Continent's right-wing populist parties to unprecedented heights. Those are all desired side-effects that conform to Moscow's calculus: Everything that hurts Europe makes Russia stronger.Berlin, too, has become convinced that Putin's involvement in Syria is about more than merely providing support for his ally Assad -- and about more than just the Middle East. For Putin, it's about Europe, about ending the sanctions and about recognition of Russia's zone of influence. "Putin is intentionally aggravating the refugee crisis in order to destabilize the EU. That is part of Russia's hybrid war," says German parliamentarian Niels Annen, foreign policy spokesman for the Social Democrats (SPD). It has become increasingly clear that Russia is not a partner in the fight against Islamic State, as some in Europe had hoped. Rather, Russia is an adversary that is willing to achieve its goals by way of violence if necessary.How, then, should Europe deal with the unpredictable ruler in the Kremlin? Should it talk to Putin or fight him? What are the consequences of American reticence for Europe? And how can this five-year tragedy be brought to an end? Is there still a solution at all beyond Bashar Assad?The Foreign Ministry in Moscow is a combination of Russia's historical pride and its new-found self-confidence. The tip of the Stalin-era structure still juts darkly into the winter sky, just as it always has, but the facade of the right-hand wing shines with a fresh gloss. Deputy Foreign Minister Gennady Gatilov, whose portfolio includes Syria, receives visitors on the fifth floor. The Middle East, Gatilov says, will continue to be a focus of Russian foreign policy for years to come. He believes that Moscow has a particular responsibility for the region and that Russia is "geographically and historically closer" to Middle Eastern countries and that "we understand their mentality better than the West may do. At least we have never tried to force our will on the people there." The comment was aimed at Washington. But in the Syrian drama, Moscow has another significant adversary: Turkey. The ambitions of Recep Tayyip Erdogan are dangerous and the West must finally recognize that fact, Gatilov says. Would Moscow suspend its bombing campaign during cease-fire negotiations as a gesture of goodwill? Gatilov shakes his head: No, the airstrikes must continue, "even in the event of a cease-fire. The logic of a cease-fire includes all those who have a real interest in negotiations, but it does not include terrorists."

The Russian Offensive

There are currently around 3,000 Russian troops stationed in the province of Latakia on Syria's coast and Russian jets have flown roughly 7,300 sorties since the end of September. During daylight hours, a Sukhoi warplane takes off from the Hmeymim air base about every 20 minutes and the Kremlin-controlled media releases claims of success daily: "The terrorists have sustained heavy losses in Aleppo!" and "More and more volunteers are joining Assad!" Footage of advancing Assad units is accompanied by hymnal choir music.But because the troops loyal to Assad -- which have long been made up primarily of Iranians and Lebanese -- are in reality only advancing slowly, they are now being supported by Russian troops. That looks to be the case from video footage from northwestern Syria that has been analyzed by Russian activists belonging to the Conflict Intelligence Team. One video shows a Russian-speaking officer who is observing the battlefield. Another shows Msta-B artillery pieces, a weapon that Assad's army has never possessed. Russian commands can be heard: "Number two, ready. Fire!"The Russian offensive managed to achieve more in just a few days than the Assad regime had in the years that preceded it -- and has also reduced Tehran's influence in Syria. Putin is now the most powerful man in Damascus and he appears to be following a strategy similar to the one he once employed in Chechnya: destroy everything until there are no more people left, there is no more resistance and no political alternative. Then he is free to install a leader of his choosing.The West has been observing the consequential brutality of Putin's new foreign policy strategy with a mixture of awe, indignation and horror. Yet it is a strategy that has long since been outlined in Putin's speeches or in the papers of Kremlin-allied think tanks. Retired General Leonid Ivashov, once a high-ranking Defense Ministry official and now the president of the Academy of Geopolitical Problems in Moscow, weeks ago declared 2016 to be a decisive year "in which Russia takes a leading role in the Middle East, thereby challenging the West and reestablishing its civilizing determination. Russia is becoming an independent geo-political actor." He says that Russia has redefined its goals and will distance itself from the West, thereby breaking America's dominant role. The Middle East, he believes, will be the focus of conflict.Putin would never say such a thing openly, but it seems likely that he is thinking in a similar vein. He has never been particularly shy about pursuing his foreign policy vision. He showed as much in Georgia in 2008 and then again in the Ukraine crisis. Now, its Syria's turn.

Merkel 'Horrified by Human Suffering'

That's why it is naïve for senior German politicians, like Social Democrat head and Vice Chancellor Sigmar Gabriel or Horst Seehofer, head of Bavaria's Christian Social Union -- the sister party to Chancellor Angela Merkel's Christian Democrats -- to dabble in foreign policy by meeting with Putin in the hope that he might help solve Germany's and Europe's problems. The East-West dialogue that they allegedly wanted to restart has been continuing the entire time. But Putin has never rewarded attempts at mediation, preferring instead to use Moscow visits by Western politicians for his own domestic political propaganda. If anything, Putin is more affected by unambiguous criticism from Merkel, who recently said she is "horrified by the human suffering caused by the air raids, particularly from the Russian side." The Kremlin immediately and brusquely rejected the critique, an indication that such words are not without effect.NATO too has recently changed its strategy when it comes to dealing with Putin. The Western alliance is currently preparing an operation in the fight against migrant smugglers in the Aegean and intends to station additional troops in its eastern member states. The plans are to be completed prior to the NATO summit scheduled for the beginning of July, with up to 1,000 troops to be sent to each of the eastern alliance members. Both objectives are primarily to be understood as messages to Putin: NATO is taking action on both the refugee crisis and in response to eastern provocations. An old Cold War term has taken on new life in the debate: deterrence.But with the intensified air war against Islamic State in Syria, the danger of a direct confrontation with Russia has also increased. There have been repeated airspace violations in recent months, with the Turkish shooting down of a Russian military jet in November marking the most severe incident.Ankara refrained at the time from asking for help from the alliance. But should Russian provocations continue, the Turkish government could invoke Article 5 of the North Atlantic Treaty, which holds that an attack on one or more members of the alliance is an attack on the alliance as a whole. Should that come to pass, the Western alliance would find itself on the brink of a military confrontation with Russia.And the situation in Aleppo could trigger the kind of escalation between the West and Russia that hasn't been seen in decades.Currently, refugees from Aleppo and its surroundings are now camping out at exactly the place where this danger is at its greatest: on the border between Syria and Turkey. Tens of thousands of people have fled the Russian airstrikes in recent days, including many women and children, poor people, the elderly and the sick. Most of them possess little more than the clothes on their backs and for many, it is not the first time they have fled the violence of the civil war. The tents set up on the Syrian side of the border by Turkish and international aid agencies have long since filled up. Instead, people are sleeping on cardboard out in the open, despite the rain and cold. Most of them want to get out of Syria as quickly as they can. But the Turkish military has closed the border, only allowing the sick and injured to pass. Soldiers are patrolling between the checkpoints and tanks roll down the streets while in the distance, explosions can be heard and columns of smoke can be seen. "Here alone, we need at least an additional 1,500 tents. We have no sanitary facilities and not enough food," says the manager of the refugee camp at the Bab Al-Salameh ("Gate of Peace") border crossing. "Some 60,000 people who previously fled live in our camp and in seven additional camps. All schools and mosques are full of people. It is cold, it's raining. We need help!"Dozens of refugees are camped out on a bit of unused land on the Turkish side of the border, not far from the city of Kilis. Waled Kabso, a 66-year-old mathematics teacher from Tall Rifaat, a town just north of Aleppo, is squatting on a blanket. He came with his daughter, whose son was injured and who is now receiving treatment in Kilis. His wife and 11 other children remain stuck in Syria. Kabso takes a mobile phone out of his jacket pocket and tries to reach his family, but is unable to. "Erdogan says we Syrians are his brothers, but why isn't he helping us?"

'Erdogan Fears Kurds More than Assad or IS'

Turkey has already absorbed over 2.5 million refugees, but Erdogan no longer wants to take any more Syrians into the country. His reasoning has more to do with forcing political concessions from Europe than with fears that his country will be overwhelmed. Although Brussels has approved €3 billion in aid to Ankara for dealing with the refugee crisis in the country, Turkish politicians have been saying for some time now that they consider this sum to be too low.The escalation of the conflict also provides Erdogan with the opportunity to push ahead with a plan he has long embraced: the establishment of a buffer zone in northern Syria as a place he can send refugees back to. More important than providing a safe zone for refugees, however, doing so would help Erdogan stop the advance of the Kurds. Erdogan himself has been one of the biggest losers in the Syrian drama. For years, he supported some of the rebels in their campaign against Assad, but with prospects of the Syrian dictator's ouster slipping, Erdogan's ultimate nightmare could actually come true -- the formation of a Kurdish proto-state located directly on the border, governed by allies of the banned Kurdish Workers' Party (PKK). "Erdogan fears the Kurds more than Assad or the IS," says Evren Cevik, the foreign policy spokesman for the pro-Kurdish HDP party in Turkey.The Kurds have been most adept at positioning themselves in the complex Syrian conflict. They are aligned with the West against Islamic State and, more recently, increasingly with the Russians as well. Last Wednesday, the Kurdish-Syrian PYD opened its second international representation office on the outskirts of Moscow. So far, the liaison office is comprised only of a telephone, a conference table and two dozen chairs, but one need look no further than at one of the most high-profile guests at the opening reception to gauge the magnitude of the outpost's symbolic impact: none other than Alexander Borodai, who rose to international prominence as the "prime minister" of the self-proclaimed "Donetsk People's Republic," a veteran of Moscow's hybrid warfare.On the same night of the opening, Syrian Kurds captured the Minnigh air base, located between Aleppo and the Turkish border, following Russian airstrikes and advances by Assad-aligned troops. The Kurds deny they are fighting alongside the regime, but all indications suggest there is some form of cooperation. The greatest risk right now, though, is that of a direct confrontation between Turkey and Russia. After Turkey shot down the Russian warplane in November, Moscow moved to increase air defenses so heavily in Syria that it would now be extremely difficult for Ankara to intervene in the hostilities taking place next door. There are nevertheless rumors that Turkey could be preparing for an invasion with ground forces. This week, Turkey sought to dispel such speculation that it was considering a solo ground effort, instead asking the US and other allies to form a coalition for a joint ground operation to bring hostilities in Syria to an end.But what would happen if a Turkish aid convoy were to be attacked by Russian fighter jets? Or if the Russians armed the Kurds with anti-aircraft missiles -- and these were then used to shoot down a Turkish jet? Or if Turkey were to provide the rebels with these weapons which they could then use to target Russian jets? Would NATO have to intervene at that point?

Obama's Silence

The man who could answer many of these questions is saying very little these days about Syria, despite the recent drama. In the past, Barack Obama has said that Assad must step down and he still refers to him as "a brutal, ruthless dictator." At the same time, though, Obama is doing nothing to counter him and there are no signs that he has anything up his sleeve either. The New York Timesrecently wrote that it is difficult to distinguish between Putin's and Obama's Syria strategies. Meanwhile, historian and journalist Michael Ignatieff and Brookings Institution fellow Leon Wieseltier lamented in the Washington Post, "It's time for those who care about the moral standing of the United States to say that this policy is shameful." It is very clear at this point that the US has no strategy beyond its half-hearted efforts to provide training and arms to rebels -- and to otherwise rely on negotiations. But none of this has born any fruit, as events in early February demonstrated.Secretary of State Kerry worked for three months to get the warring parties to a negotiating table under the auspices of the United Nations -- moderate rebels, representatives of the regime, Iranians, Saudi Arabians and Russians. But Moscow then turned around and launched its offensive right as the talks began. Within 48 hours, the Russian air force carried out 320 airstrikes in northern Syria alone. It was no coincidence that the storm on Aleppo began at that exact moment. The aim was that of destroying any possibility that the opposition would have a say in Syria's future."All sides were aware that a continuation of the talks would become increasingly difficult for the opposition as the regime intensified its military offensive," diplomats in Geneva said. After two days, the UN mediator Staffan de Mistura suspended talks. Right now, it doesn't look as though the opposition will be prepared to return to Geneva on Feb. 25 as planned. And why should they?

Assad's 'Core Syria' Strategy

Assad's aim right now is to capture militarily a kind of "core Syria," in which the majority of the population lives. If successful, he will be able to negotiate from a position of strength and dictate the conditions, which are certain not to include his resignation. At a reception held during the Syria donors conference in London at the beginning of February, three human rights activists from Syria asked Kerry why the US hasn't done anything to ensure the protection of the civilians. The secretary of state countered: "Don't blame me, blame your opposition." "Kerry was really angry," one of the women, who wishes to remain anonymous, recalls. "He said the opposition should have accepted what they were capable of getting. We replied that the Russians had dropped 230 bombs on Aleppo on a single day. He corrected us by saying it had only been 180. Then he said, 'These airstrikes will continue for three more months. The opposition will be decimated.' And he said it would be their fault and not that of the Russians."

Has Obama Given Up Hope?

When Putin intervened in Syria, Obama seemed to give up any hope of being able to solve the crisis in the Middle East, if he hadn't already. He is afraid of a confrontation with the Russians, but he is also concerned because he needs Moscow to ensure that the nuclear deal with Iran is a success. The US government will not expand its involvement, argues Hardin Lang of the Center for American Progress, a think tank with close ties to the current administration. Lang says Assad's removal is but a distant prospect now and that it would be hard to imagine how a transfer of power between Assad and a new government could work anytime in the near future. "The world looks different today than it did only three or four months ago," he says. Currently, Obama's Syria strategy consists almost entirely of fighting Islamic State. In contrast to Assad, whom he views simply as being an annoying dictator, the president sees Islamic State as a threat to US national security. In addition to airstrikes, this strategy also includes an emphasis on supporting Kurdish operations. More than 50 special forces are operating in northern Syria and Iraq right now in support of the Kurds. The strategy is proving effective, even if only slowly, with the area under IS control having been reduced by one-third. But this has also entailed a bizarre division of labor: The US is bombing IS in the east of Syria while Assad and Putin recapture the rest of the country. To many Syrians, that looks a lot like cooperation.At the same time, in order to force the rebels to the table at the failed talks in Geneva, the US ceased providing military aid to rebel groups and also pressured its allies to do the same. The rebels, who are fighting against Assad, but also against IS, are embittered, angry and desperate. "How could Obama have been so naïve to believe that all he had to do was cordially invite Putin or Assad?" asks a perplexed Ismail Naddaf, of Aleppo's Fatah Brigade. "America never wanted to topple Assad. They wanted negotiations, but that was illusory. Assad doesn't negotiate."

'Looking on as We Get Massacred'

Abd Alsalm Hmedi, a former fighter pilot from Aleppo who defected to the Free Syrian Army in 2012, also feels abandoned. "You cheered on the revolution, but now you are just looking on as we get massacred by Assad and the Russians," he says. Like many moderate rebels, he has the feeling that the predictions made long ago by radicals are now coming true: that America is betraying them. Some fighters will now join forces with IS and many will turn to the Nusra Front, part of al-Qaida.

Diplomacy too has its price, particularly when it fails. The price of Western passivity is the endless suffering of people in Syria, the strengthening of Putin, divisions in Europe and the rise of the radicals.And yet, there were opportunities in the past five years for steering events in Syria down a different path. The West, especially the United States, could have been more resolute in its support of the rebels and provided them with the necessary equipment. It could have implemented and enforced a no-fly zone in parts of the country, giving countless people the possibility of staying in the country rather than fleeing. And Washington should have followed up on its threat that there would be consequences if the "red line" of a chemical weapons attack were crossed, as happened on August 21, 2013. Such a response could have come in the form of targeted military strikes against regime positions and military bases.Back then, it still wasn't too late.

Playing Chicken with Moscow

If the West were to conduct a military intervention today in order to prevent further tragedy in Aleppo, the risk of a direct confrontation with Russia would be considerable. Despite that threat, an increasing number of observers are calling for action. If the US and NATO allow the siege of Aleppo to proceed, they will be "complicit in crimes of war," Ignatieff and Wieseltier wrote in the Washington Post. "Aleppo is an emergency, requiring emergency measures." It is also an opportunity, they wrote, "perhaps the last one, to save Syria."

Their plan calls for the US, with the use of its naval and air assets and under the NATO umbrella, to establish a no-fly zone from Aleppo to the Turkish border -- and make clear it will be defended. There is, of course, a threat of a confrontation with Russia, but that is in no way a foregone conclusion, especially given that the US Air Force is already in constant contact with the Russian military about its operations in Syria. If the price of intervention gets even higher for Putin, he would likely be more prepared to make concessions, they write. That "may set the stage for a tough and serious negotiation to bring an end to the slaughter."

Saudi Arabia has already announced that it wants to send in ground troops, prompting Russian Prime Minister Dmitry Medvedev to warn on Thursday that boots on the ground could spark a "world war." However, there is nothing to indicate that the United States has any plans to lead an invasion army -- at least not for the remainder of Obama's final term. In all likelihood, though, starting in 2017, a more strongly interventionist president will reside in the White House. But by then, Assad may have won. It's a victory that would result in many, many losers.Almost all of the rebels and most of the refugees are part of the Sunni majority. Middle East expert Nicholas Heras, from the Center for a New American Security, believes that changing the country's demographics is a cornerstone of Assad's strategy. "The Assad regime has a clear devastation and depopulation strategy," he recently told BuzzFeed. "Both the Assad regime and Russia understand full well that in order to win the war, they have to destroy the local communities that give the rebel movement support." If some rebels then join al-Qaida or Islamic State, that could even benefit Assad because it will increase the willingness to see the Syrian president as the lesser of two evils. Yet that would not mark a return to the pre-2011 Syria, nor would it establish the security and stability necessary for a return of the refugees.The hate is too strong, the destruction too vast and the fear of revenge and persecution by Assad's secret services too great. The remaining rebels may just continue fighting in a bitter war of attrition.As the situation currently stands, people will continue to die. People like canary-breeder Juma al-Najar, 45, his wife and 18-year-old daughter. When the Russian airstrikes began, they fled their hometown of Maraa, located between Aleppo and the Turkish border. A week ago Monday, they returned in the hopes of soon being able to escape to Turkey, but on Tuesday, a bomb dropped by a Russian jet hit their house. Only their legs, arms and heads remained, quickly buried in six plastic bags.People will continue to be wounded. People like the grandchildren of the farmer's wife Fatima al-Dik in the village of Ratyan. They were hit by a missile and are now fighting for their lives in a hospital in Kilis. Or people like the 82-year-old great-grandmother Fattum Kaddour, who has now, for the second time, been pulled out of the rubble of her bombed out home in Aleppo. She has now managed to flee to the Turkish border. "I wish I were dead," she says.The horror simply continues, like in Aleppo, where two children were just recently torn apart by Russian bombs in front of their school. The school is in a basement, because it is at least halfway safe underground. The story is told by a former law student named Zuhair, who organizes classes in seven Aleppo schools. "Entire city quarters have emptied out; teachers have fled as have many families. And that even though the border is closed and nobody knows where they might be safe. Everywhere I look, I see fear in people's faces."On Monday, Feb. 7, several bombs fell on a street in the residential Aleppo district of Sakhour, he recalls. "It was terrible. There were body parts lying all over, here a hand, there a head, a foot, a torso. And people just kept walking, hardly any of them looked shocked and nobody stopped," Zuhair says. "Have we become monsters? Or is that our way of staying normal amid the lunacy that surrounds us?"

Why is the Middle East in flames and Russia on the rampage? In both Europe and the Middle East, it is common to hear the blame placed on Barack Obama. The US president, it is charged, is a weak and disengaged leader who has allowed international events to get out of control.

Many Americans — both liberals and conservatives — make the same accusation. Sarah Palin, darling of the American right, has called Mr Obama “capitulator-in-chief”. Roger Cohen, a New York Times columnist, has blamed Syria’s agony on the “fecklessness and purposelessness” of the Obama administration.

Those who yearn for a more muscular US foreign policy often assume that Mr Obama will prove to be an aberration — and that the next president will “put America back in the game”. But that could well be a misreading of the underlying direction of US politics and foreign policy. The current frontrunners in the presidential election campaign — Donald Trump on the Republican side and Bernie Sanders for the Democrats — have embraced ideas that are isolationist, in all but name. If those ideas prevail, they would make Mr Obama look like a super-engaged internationalist. Even if Mr Trump and Mr Sanders never get close to the White House, the popularity of their campaigns, and their influence on the more mainstream candidates, suggests that there is now a strong constituency in the US for a retreat from globalism: repudiating international military and economic commitments. The inherent isolationism in Mr Trump’s thinking can be disguised by his chest-thumping rhetoric about rebuilding the military and getting tough with foreigners. But it is no accident that his signature initiative is to build a gigantic wall along America’s southern border. Mr Trump’s economic rhetoric is all about shutting out the world. He is the most explicitly protectionist candidate in the field, promising, for example, to make sure that Americans buy US-made cars and machinery, not Japanese imports. He denounces the trade deals that the US has signed as bad for America and has pledged to rip them up. Mr Trump takes a similarly mercantilist attitude to security, promising to force South Korea and Japan to pay for America’s military protection. The implication is that there is no inherent US national interest in underwriting the security of the Asia-Pacific region. That logic, taken to its obvious conclusion, would be a formula for America pulling back from its security commitments all over the world.

Mr Trump is also a frank admirer of the Russian president, Vladimir Putin, calling him a “strong leader” and basking in Mr Putin’s praise. In a recent Republican debate, all the presidential candidates queued up to denounce Mr Obama for not crushing the jihadis of Isis, but none mentioned Russia’s intervention in Syria. As a foreign policy “realist” and self-proclaimed dealmaker, Mr Trump would undoubtedly be attracted to granting President Putin his longed-for Russian “sphere of influence” in eastern Europe. And once that is done, why not cut a similar deal in East Asia with Xi Jinping of China, another tough-guy foreign leader who Mr Trump openly admires?

Senator Sanders has not embraced the militarism of Mr Trump’s view of the world. Instead, he has opted for the leftwing version of isolationism: denouncing the idea that America should be “policeman of the world”. Mr Sanders also has a Trump-like distaste for free trade, proclaiming: “Unfettered free trade has been a disaster for working Americans.”

Together, Mr Trump and Mr Sanders are capitalising on growing American disillusionment with globalisation. The living standards of middle-income Americans have been under pressure for decades, and foreigners and an internationally connected elite are easy scapegoats. Both the far right and the hard left in America are now promising a retreat from globalisation. But any such retreat would have profound consequences, not just for the international economy, but for America’s role as the world’s most powerful nation.

Of course, both Mr Sanders and Mr Trump are still a long way from the White House. The bookmakers’ favourite to be the next president remains Hillary Clinton. And yet, even Mrs Clinton has had to respond to the new public mood. Last week, she adopted Mr Sanders’ claim that the economy is “rigged” in favour of a privileged elite.

Mrs Clinton has also come out against the Trans-Pacific Partnership (TPP), a new trade deal that she once championed as secretary of state. As president, Mrs Clinton would probably find a way of supporting the TPP, which she used to argue is a crucial part of America’s “pivot” to Asia. She certainly takes a conventional “establishment” view of the importance of American leadership in the world.

But the current course of the presidential election suggests that it would be foolhardy to dismiss the chances of either Mr Trump or Mr Sanders actually winning their parties’ nominations and, ultimately, the presidency.If that were to happen, the commentators who are currently bemoaning the “weakness” and “fecklessness” of President Obama would come to realise that, in fact, he might be the last in a line of serious and committed internationalists to occupy the Oval Office.

This has been a momentous month for gold, with it finally breaking out of its long downtrend to commence a major bullmarket. Thus it is amusing to see Goldman Sachs talking about it dropping back to $1000 again. Those timorously wondering whether they are right should stop and ask themselves whose interests are paramount to Goldman, the government and Wall St, or the Little Guy trying to protect what's left of his capital. Those still in doubt should read Goldman Capitulates.We have been wondering over the past week whether gold and silver have been starting to mark out bull Flags or whether they are instead at intermediate tops. That question is answered for us by the latest COTs which reveal that Commercial short positions have exploded in recent weeks, particularly in silver, where they are now at "nosebleed levels". We therefore now expect a correction, which could be quite heavy - so Curb your Enthusiasm, people. When it happens don't be fooled into thinking that the bearmarket is back on and Goldman is right. Instead take the opportunity to back up the truck and load up on PM sectors investments, many of which have risen too far too fast in recent weeks.On its 6-month chart we can see that gold's breakout move involved it accelerating in a parabolic arc slingshot move, which resulted in burnout when it became extremely overbought. When we saw the gold price getting way ahead of its parabola, we liquidated our leveraged bull ETFs in the sector, only to look like jackasses 2 days later when gold spiked up by over $50. However, although we missed the cherry on the cake that this 1-day spike represented, the way things are shaping up that decision is not going to look like a bad one soon, especially given where we bought them at much lower levels late in November. We did not liquidate our gold stocks, however, and been letting them go at good prices in recent days in anticipation of a correction. Will gold correct not just to the parabola boundary, but break down from it? It looks like it will, given the latest COTs, and that is perhaps not a bad thing given how impossibly steep the parabola is becoming. When it does break down from the parabola the ensuing drop is likely to be sharp.

On the 6-year chart we see that the big picture is now strongly bullish, with the price having broken out of its long downtrend in force from 2012 on strong volume, so after the bull is done shaking as many new riders off his back as possible in coming weeks, the advance is likely to resume.

If you want fundamental reasons for a new bullmarket, you really don't have to look far. Try aggressive NIRP (Negative Interest Rate Policy) for starters. The big banks have plans to seriously mine their customer's accounts, and we are not talking about charging half a percent a year here, we are talking about 2 or 3 percent of your account money being siphoned off into their coffers every year for the privilege of you being able to hold an account with them. Of course, any rational person knowing this was coming would withdraw their money and stuff it under a mattress or buy gold, so they are going to be prevented from doing so, by the introduction of the "cashless society". The first steps towards this have just been announced with the proposed elimination of high value bills like the 500 euro note and $100 bill, ostensibly to impede the activities of criminals and money launderers, which is of course a smokescreen to hide their true intent. Now you can see why gold suddenly looks so attractive - which would you rather do? - be a sheep and hold your money in a bank account and be fleeced to the tune of 2 or 3% a year, or own gold, where at least you are aren't losing capital, apart from storage costs. It's a no-brainer and with the cashless society and extreme NIRP (bank plunder) now appearing over the horizon, you can readily understand why gold is coming to life. That won't stop a correction short-term however, especially if the investing public get suckered again by the latest stock rally.Long-term The Matrix will not tolerate escape routes like gold, so we can expect the ownership of gold to be outlawed and holdings subject to forfeiture, i.e. stolen by the government for nominal compensation, which is why Smart Money will be stashing gold in safe foreign locations before exchange controls are implemented in many Western societies, and organizing dual citizenships etc. The seizure of gold is still probably a long way off, however, and will occur after the cashless society is implemented, and in the meantime we are likely to witness a roaring bullmarket in both gold and silver.Turning now to the all-important COTs, we see that Commercial short positions have ballooned in recent weeks to high level, and given that the latest reading, taken after the gold smackdown last Tuesday, does not incorporate the increases that must have accompanied the ensuing bounce back in gold on Wednesday and Thursday, we can presume that actual readings for now are higher than shown here. This is starting to look seriously bearish for the near-term, and the silver readings are much worse.

On the long-term Hedgers chart, which is form of COT chart, we can see that positions are approaching the bearish side of the track, although overall, the level is not too seriously bearish, but it does portend a probable reaction soon.

The latest gold Optix, or Optimism chart, shows that optimism towards gold has soared - to its highest levels since 2012. This has happened quickly and is another warning that a correction is probably imminent.

A correction in the Precious Metals is of course likely to coincide with a dollar rally. The dollar got slammed early in the month as we had expected on growing realization that the Fed's rate rise was a "mistake" that will eventually be reversed in preparation for NIRP, as we can see on its 6-month chart below. In reality the Fed's rate rise in December was a sop to the mugs who had believed their story about raising rates, so that they couldn't turn round later and say "You lied to us for 18 months saying you were going to raise rates and didn't." Right now the dollar could rally in sympathy with the stockmarket for a while. The latest Hedgers chart, shown below, is in middling ground and thus doesn't provide much guidance, but it has been edging towards a bullish condition for many months, and so there is certainly room for a rally here.

The 2-year chart for the dollar shows it trending sideways with a possible major top forming, with a temporary state of balance between bullish and bearish forces. On the bullish side we have the danger of a continued unwinding of the carry trade coupled with flight to safety into the dollar, on the bearish side the spreading realization that the Fed will join the pack and head in the direction of NIRP. A short-term rally towards the highs but not beyond them, in parallel with completion of the current stockmarket countertrend rally, will likely coincide with the expected correction in gold and silver.

Precious Metals stocks have definitely broken out of their downtrend, as we can see on the 6-year chart for GDX shown below. However, this looks like a "too far too fast" situation, especially as moving average alignment is still unfavorable, so a correction back is in order here, that would accord with the prospects for gold and silver in light of their latest COTs.

The 7-month chart for GDX is most interesting as it shows it rounding over having hit a target, so it is logical to expect it to correct back now. An amusing point to observe is how Big Money ran a lot of people out of their positions by triggering stops in mid-January - right before the big runup, a classic tactic.

The latest Gold Miners Bullish % Index shows that the investing public are now highly confident towards the sector, with the highest level of confidence for over 3 years. What better time for new investors in the sector to learn the art of losing money in a bullmarket?

If you had to pick the moment when European banking reached the point of no return, which would you choose? The July day in 2012 when Bob Diamond resigned as Barclays’s chief executive officer amid the Libor rigging scandal? Or the fall morning later that year when UBS announced it was pulling out of fixed income and firing 10,000 employees? How about Sept. 12, 2010, when Basel III’s raft of costly capital requirements started upending the economics of global finance?All signature events, to be sure. But try May 21, 2015. That’s when Deutsche Bank stockholders filed into the dome-shaped Festhalle arena in Frankfurt to take part in one of the most venerated and, let’s be honest, boring rituals in corporate life: casting a vote on management’s strategy and performance. It wasn’t dull this time. Almost 40 percent of the bank’s investors gave co-CEOs Anshu Jain and Jürgen Fitschen a big thumbs down. While winning six out of 10 votes is a landslide in politics, it’s a crushing blow at a publicly traded company. By the end of June, Jain was out and Fitschen had agreed to leave the company by May of this year.

Illustration by David Foldvari

Investors are running out of patience with European bank chieftains, and no wonder. Since the fall of Lehman Brothers in September 2008, eight of Europe’s biggest banks have announced layoffs adding up to about 100,000 employees, paid $63 billion in legal penalties, and lost $420 billion in market value. In 2015, Deutsche Bank lost a record €6.8 billion ($7.6 billion). In mid-February the industry suffered an epic selloff as subzero interest rates, China’s slowdown, the oil crash, and looming regulatory and litigation costs triggered an outbreak of fear not seen since the fall of 2008. Just last year new CEOs took over at Barclays, Credit Suisse, Deutsche Bank, and Standard Chartered. Now they have to find a way to prosper in a marketplace that’s being reshaped simultaneously by strict new capital regulations and myriad financial technology startups that don’t have to abide by them.

While American banks appear to have turned the corner since that gut-churning autumn nearly eight years ago, European institutions are girding yet again for another round of restructuring. So much so that analysts in London call them “building sites,” Bloomberg Markets magazine reports in its forthcoming issue. Credit Suisse’s new CEO, Tidjane Thiam, is “right-sizing” the investment bank and pushing for a 61 percent jump in pretax income from his international wealth management unit over the next two years. At Barclays, Jes Staley wasted no time cutting 1,200 investment banking jobs and closing offices in Asia and Australia after taking charge in December. Meanwhile, John Cryan, the British executive who replaced the India-born Jain, is pursuing an unprecedented overhaul of Deutsche Bank’s entire information technology infrastructure to shore up shaky risk-management systems.No event crystallizes the forces at work in European finance more than Jain’s exit and Cryan’s entry.Jain, 53, a fixed-income maestro who excelled on the trading floor and the sales side, did as much as anyone to build Deutsche into an investment banking powerhouse with operations in 70 countries. No surprise, then, that when it came time for him to draft a five-year plan to confront the forces buffeting the institution, he balked at a fundamental reorganization along the lines, say, of what Sergio Ermotti did at UBS in 2012. In April 2015, Jain and Fitschen vowed to divest Deutsche’s shares in the German retail lender Postbank and retreat from more than a half-dozen countries as part of a €3.5 billion cost-cutting plan. Even so, as Jain put it, Deutsche Bank would “remain global … remain universal.” He said in a Bloomberg TV interview at the time, “There was quite a bit of speculation that we might have done something even grander, even more radical. It really became a case of not altering the core DNA.”That wasn’t what investors wanted to hear, and Deutsche shares skidded almost 10 percent over the next week. Analysts griped about the bank’s soaring litigation costs. That month, Deutsche agreed to pay $2.5 billion in penalties to U.S. and U.K. authorities for its role in the Libor rate rigging. (No current or former member of the bank’s management board was implicated.) But something deeper was at work, too. European banks aren’t going through a stormy phase that will eventually clear and permit them to claim a new golden age.The industry is undergoing a metamorphosis that will demand a thorough and radical alteration of its core operating model.

Zúrich Photographer: Mark Henley/Panos Pictures

Since the late ’90s, lenders on both sides of the Atlantic have sought strength through consolidation.They became financial supermarkets, cross-selling products and services to as many clients as they could reach. Theirs was a belief system built on the promise of efficiency and growth; in the end, the regime failed to deliver either in a sustainable way. Now universal banks in Europe are unbundling. “To play the game, a bank had to be integrated,” says Clayton Christensen, a Harvard Business School professor who wrote a landmark 1997 treatise on industrial-scale disruption, The Innovator’s Dilemma. “What’s happening in their world is that it’s becoming more modular. More services can be provided by independents. Little by little, customers will move away from the old and into the new.”But the banking industry is becoming more febrile as Cryan, Thiam, and their peers struggle to re-engineer their firms in the face of an unforgiving market and a stalled European economy. On Feb. 8, Deutsche Bank shares nose-dived almost 10 percent and the price of credit default swaps backstopping its debt soared to its highest level since 2011, according to data compiled by Bloomberg. The cause? A warning from credit analysts in London to clients that Deutsche may be unable to service some of its riskiest bonds next year. Cryan wasted no time in telling the marketplace that the bank was “rock solid” and would not miss bond payments. Still, it was an ominous flashback to the months leading up to the 2008 crash when one bank boss after another assured investors that their firms weren’t sliding into a capital crunch.At the same time, peer-to-peer lending, mobile banking, and the advent of the blockchain, the software powering bitcoin, are mounting a challenge to banks—simplifying finance by making it easier to manage money and send payments overseas. Banks are racing to catch up by establishing accelerators to incubate startups, sometimes joining forces to pool expertise, and even patenting their own digital currencies. More than 100 startups are now attacking the core services of retail banking in the U.S. and U.K., according to CB Insights, a New York research firm. “The intimacy and distributed power of a smartphone in the hands of a person is so different than anything we’ve faced in our business careers,” Brian Moynihan, CEO of Bank of America, mused during a roundtable discussion at the World Economic Forum in Davos in January.

For all the changes imposed by policymakers, it’s the propellerheads in London, New York, and Silicon Valley who may truly rewire the business of banking. Venture capitalists, angel investors, and bankers themselves have plowed more than $24 billion into fintech startups worldwide in the last two years, according to Innovate Finance, a London-based trade group. “There’s a fundamental change taking place in banks,” says Sam Hocking, who was once co-head of global sales at BNP Paribas’s prime brokerage unit. “They see the unbelievable costs in their technology, and if there are ways to bring them down by working with outside firms, that’s got to be meaningful.” Hocking now runs AltX, a San Francisco-based startup that produces portfolio analytics for hedge fund managers and investors.There’s no better place to get a feel for the fintech moment than the 39th floor of One Canada Square, a pyramid-topped tower in the heart of the Canary Wharf complex in London’s East End. Three years ago, Claire Cockerton and Eric Van der Kleij, entrepreneurs who specialize in developing startups, set out to build Level39, the biggest accelerator for this new breed of startups in Europe. It’s owned by Canary Wharf Group, the property developer that’s long been the London landlord for the world’s biggest banks. Having been whipsawed in the crash, Canary Wharf concluded it might not be wise to depend on banks for its future growth. It’s literally constructing the future on the eastern edge of its land: a cluster of towers that one day will lease space to fintech startups, some of them incubated practically in-house.On any given weekday, Level39 is buzzing as entrepreneurs attend conferences and commiserate with investors in a lounge-workspace with views of skyscrapers bearing the logos of Citigroup, Credit Suisse, and HSBC. UBS has been running experiments on issuing “smartbonds” in its blockchain lab here. Dopay, a startup based here that enables companies to pay their employees via an app, has joined forces with Barclays. “After the crash, everyone thought it was going to be tough for a while and there would be layoffs but then sentiment would return,” Van der Kleij says. “What no one expected was fintech.”

“If you could invent a bank today, would you?”

If there’s one chief executive who’s hip to this epic moment, it’s Cryan. As UBS’s chief financial officer from 2008 to 2011, he helped steady the Swiss bank as it lost billions on toxic subprime mortgages and related debt. Now he’s charged with fixing 146-year-old Deutsche Bank—a task that requires him to live up to his reputation, in the words of a German newspaper, as “the ice-cold housecleaner.” A better moniker might be: teller of uncomfortable truths. At a banking conference in Frankfurt on Nov. 23, the 55-year-old CEO took on the rich paydays for investment bankers: “Many people in the sector still believe they should be paid entrepreneurial wages for turning up to work with a regular salary, a pension, and probably a health-care scheme and playing with other people’s money.” On Jan. 28 he slashed bonus pools at the bank “as a matter of justice.”Cryan has even pined for the stability of American banking. “The bank I would love to run at the moment is Wells Fargo,” he said in a press conference on Jan. 28. “I would love to make 400 basis points in retail banking and have a relatively easy life.” The San Francisco-based lender, which recorded $23 billion in profit in 2015, recently became the world’s most valuable bank. Cryan’s envy is understandable. With most of their legal bills paid and Dodd-Frank’s rules written and implemented, U.S. lenders are getting back to business. JPMorgan Chase hauled in a record $24.4 billion in earnings last year in a near-zero interest rate environment. The S&P 500 Financials Index outperformed its European counterpart, the Euro Stoxx Banks Index, by 14 percentage points in the 12 months ended Feb. 12.Forced to balance different political, cultural, and financial rules in a multitude of nations, the euro zone’s leaders didn’t manage to put together a banking union until 2013. “If you realize how dependent we are on the banking system, you also realize how foolish we were to deal with the banks late,” said Jeroen Dijsselbloem, the Netherlands’ minister of finance, during a panel discussion in Davos. “The U.S. dealt with the banks very quickly, made them recapitalize, made them take their losses, and it took us three, four, five years more.”Steve Schwarzman, the chairman and CEO of private equity giant Blackstone, suggested in the same discussion that regulators were stifling economic recovery in Europe by leaning too hard on banks. “Regulation has made the world more dangerous,” Schwarzman said. “Please don’t say that we have overregulated the banks,” said Dijsselbloem, who also serves as the president of the Eurogroup, which is made up of the euro area’s finance ministers. “We still have a number of issues to deal with to make the banks able to support economic growth again. Rather than saying regulatory regimes put in place are smothering economic activity, I think it’s actually the opposite. What’s smothering economic recovery in Europe is the effects of a financial crisis. That wasn’t caused by overregulation.”

Just because banks are welcoming innovation doesn’t mean they can control it. Startups are reinventing the business of retail banking. London-based Funding Circle has arranged more than $1.5 billion in loans to small businesses in Germany, the Netherlands, Spain, the U.S., and the U.K. since 2010, delivering an average annual return of 7 percent to lenders. The startup is still tiny compared even with midsize banks. By matching borrowers and lenders on its website, it doesn’t have to use its own balance sheet to make loans. Plus, it gains an enormous cost advantage by not maintaining a branch network or a mountain of money to comply with capital ratios. “If you could invent a bank today, would you?” asks Samir Desai, Funding Circle’s CEO and co-founder.

Funding Circle and its ilk, of course, have yet to be tested in an economic crisis, and investors clearly aren’t sold on the revolution they promise: Shares in LendingClub, the No. 1 online lender in the U.S., plunged 68 percent in the 12 months ended Feb. 12. And banks could just acquire fintech companies and try to fold them into their operations. But Christensen says no large organization in any industry has ever been successful in building disruptive technology on its own. There’s too much legacy in their operations, culture, and management practices to make such a leap. Christensen says he found JPMorgan Chase’s recent decision to distribute small-business loans through On Deck Capital, a New York-based online lender, groundbreaking. The bank is essentially telling the marketplace that it trusts On Deck’s methodology for managing risk. That’s huge for the burgeoning peer-to-peer industry.

Yet Christensen urges JPMorgan Chase not to bring the tie-up inside the castle walls and risk smothering the innovation. “They have to set up these things separately and keep them separate so they can grow in a new space,” he says. “Then one by one the customers of the traditional bank will leave and do more of their banking in these new structures. So you won’t take the new technology and integrate it into the old bank. You’ll take the customers out of the old bank and integrate them into the new one.”

Pretty radical, right? At Davos, Cryan surprised his fellow VIPs by embracing the gauziest fintech dream of all—a cashless society. “Cash in 10 years’ time probably won’t exist,” he said. The quote made headlines across Germany. Last October, Cryan dispatched Chief Operating Officer Henry Ritchotte to set up a digital bank. “We’re currently building an attacker whose only job will be to attack Deutsche Bank,” Paul Achleitner, chairman of the bank’s supervisory board, said at the time. “It’s exciting.”In the end, the banking industry’s troubles can be traced back to one thing: the cost of complexity.From the moment banks went global in the late ’90s, skeptics decried these behemoths as too big to manage, let alone too big to fail. But the institutions thrived on the very creation of complexity in their products and in the markets. Now, to paraphrase what former Deutsche Bank CEO Josef Ackermann said then, there’s once again a flight to simplicity. That’s what regulators are demanding. And that’s what legions of customers are expecting as startups deliver financial services at the tap of an app. The unbundling of banking is undoubtedly complicated and perhaps even fraught with unseen dangers. And yet it’s really all about getting back to basics.

The majority of the world’s stock indices topped out this month on Monday, February 1st, 2016 after a strong oversold technical bounce in price. Several indexes are now in the process of their first re-test of those multi-month lows which should act as support.

My belief is that the FED will abandon its plan to raise short-term rates in March 2016, given the “economic global contraction” in economic data including the Baltic Dry Index and troubled banking systems in the European Union.

The Baltic Dry Index below displays the major global contraction is now in process, it has now broken support at the 300 level and heading much lower. The Baltic Dry Index tracks the price of shipping raw materials across trade routes which makes it a good indicator of global economic activity. It is the pulse of World trade. The demand for goods is currently collapsing.

The BDI is one of the key indicators that experts look at when they are trying to determine where the global economy is heading. And right now, it is telling us that we are heading into a major worldwide economic downturn. In fact this trader warned of this happening on Nov 2015 in his report: The Collapsing Global Trade

European banks have been absolutely hammered, and Germany is massively exposed because it does huge business with China. Deutsche Bank, Credit Suisse, Santander, Barclays and RBS are among the stocks that are falling sharply sending shockwaves through the financial world.

Deutsche Bank is the biggest bank in Germany and it has more exposure to derivatives than any other bank in the world. Deutsche Bank credit default swaps reflect that there are in deep financial problems and that a complete implosion is imminent.

In 2015, Deutsche Bank had lost a staggering 6.8 Billion Euros. The most important bank in Germany is exceedingly troubled and it could bring down the Europe Union. Credit Suisse announced that it will be eliminating 4,000 jobs. Most U.S. consumer banks are cutting jobs and trimming branches. Bank of America and Citibank eliminated 20,000 staffers between them and JP Morgan Chase eliminated 6,700 positions.

The world is currently threatened by the $200 trillion “credit bubble” that is currently deflating. It was created by the FED and global central banks. Despite so many trillions of dollars in QE, we never experienced the full recovery that we were told would happen!

China's banking system is just months away from its day of reckoning. Its $5 Trillion of unstable debt will bring down the whole global financial system. China's debt binge is beginning to unwind.

This is just more evidence that global trade is grinding to a halt and that 2016 is going to be a “cataclysmic year” for the global economy.

As these fears become reality expect the FED to reverse course and perhaps even impose 'negative nominal interest rates.' here in the US. In a speech, on February 22th, 2010, to the University of San Diego's business school, Chairperson Janet Yellen was quoted “If it were positive to take interest rates into negative territory I would be voting for that".

The FED is fearful of making another mistake and they are finding it hard to do anything correct. They are paralyzed. It is my belief they will hold off, thus causing the dollar to fall, while other currencies and precious metals rise.

The US Dollar has lost over 95% of its purchasing power in the first 100 years of the FED existence.

Interest-rate jitters going forward are what brought gold up, and with stock markets crashing all over the world and the U.S. “economic contraction” nothing is pointing to more rate hikes, that's why gold is golden AGAIN!

New central bank policies of “negative yield returns” provides a fundamental reason to own gold today going forward. The Bank of Japan has cut interest rates to negative 0.1 percent which follows similar moves by ECB, Denmark, Sweden, Switzerland and very soon South Korea.

The basic idea is that gold will be the new currency to evolve.

The bigger story was in precious metals. Gold continued to soar reaching a new cycle high of $1175.00/ounce and Silver also rallied to a new cycle high of $15.06/ounce on February 5th, 2016, its highest mark in three months. The world's largest gold-backed exchange-traded fund, SPDR Gold Trust rose to 22.3 million ounces on Thursday February 4th, 2016, the highest since late October 2015.

Who would have guessed that gold would be one of the best assets to own in 2016? So far, that has been the case. While the U.S. stock market has rung up its worst start to a year and a cloud of economic doom and gloom continues to roll across much of the world.

Gold is on a hot streak, up 10% this year alone, after shrugging off the Federal Reserve's interest-rate increase back in December 2015. It should have spelled doom for prices, instead, it's on track to gain 10% and more so far in 2016. True, it's still early in the year, but if gold were to just tread water for the next 11 months, it would mark the best annual gain in four years.

Typically, a rise in goldand a fall in equites sends the US Dollar lower. From there, other commodities will begin to rise including agricultural, oil and softs such as coffee. But we do not just make money from rising prices. See how traders profited handsomely from the collapse of sugar in January.

2016 is and will continue to be an incredible year for traders and investors. Volatility will remain high, price swings will be large and new big trends are emerging.

If you are an active trader or passive long term investor looking for simple, logical trades to profit from the next major trends in stocks, bonds, and commodities then follow me at: www.TheGoldAndOilGuy.com

If you know the other and know yourself, you need not fear the result of a hundred battles.

Sun Tzu

We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.